Copy for Real Estate Guide Column for 6-29-07
REAL ESTATE PATTERNS
By Ken DuVall

OVERALL PICTURE

With every report on real estate and the economy, we get different facts. It depends on who’s talking and where they’re coming from, politically and economically. Its like, is the leaf pile burning up, or burning down? It’s all in your point of view.

After 44 years in this business, I know who I can trust to provide the true picture. I’m looking at a chart of 1st quarter median home prices for the entire country. Out of 15 large metros, 8 are up from 3.8% to 14.6%. Of the remaining 7, there was a drop ranging from only .6% to 2.2%.

Commercial property sales all over are hitting new records. With a huge $157 billion invested in the 1st four months of 2007, up from $97 billion in the same period in 2006, it’s booming. A good commercial listing in Chico is hard to find these days.

We know that all real estate is a local market unto itself, from area to area, block to block, even house to house. Chico is holding its own just fine. We are clearly insulated from most outside influences. Our home inventory is staying level lately for the most part. Deals are going into escrow nicely.

No question we’re in the pause cycle between inevitable booms right now. California for the most part and Chico specifically should not experience any kind of real estate calamity in the foreseeable future. Slower, but not down the tubes.

It’s a soft housing market, no denying that. But over the next 2 years or so, I expect to see our venerable annual appreciation rate of 4% to 5% become the norm again. Forget 20% a year. That’s history. Remember: Chico has a limited supply of land. People will continue to move here for the Good Life until it’s all gone. What’ll a house be worth then?

Weakness in the new home market persists, despite the fact that Chico developers are pushing through 1000’s of new home plans. They can’t just quit when the going gets tough. I’ve heard that 10% of builders around the country will take your old house in trade so you can buy their new one! We trade in our cars, don’t we? Creative real estate at its finest.

The economy is gaining momentum and expanding per the Fed report last week. Manufacturing, consumer spending and retail sales were all up nicely. Even as loan rates have been trending higher due to bond and foreign market gyrations, inflation is moderating indicating the Fed probably won’t increase rates in the near future. So far, so good in my book.

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 6-15-07

REAL ESTATE PATTERNS
By Ken DuVall

A NEW BALLGAME

While portions of the real estate downturn are behind us, the buyer’s market is likely to continue for two years. Foreclosures are nowhere near over. We’re heading for more price declines. The market is adjusting. Any new home offering today may be a better deal than existing home prices since many sellers haven’t bitten the bullet yet. Harsh stuff for some of us.

But resale prices will catch up as we go. Economists tell us the housing downturn will not push the country into recession. Amazingly, the Fed numbers out June 4th shows national home prices actually UP 0.5% in the first quarter, and year over year, 4.3% HIGHER than 2006! Go figure.

Fortunately the subprime situation will not affect the economy. Those loans accounted for 25% of all California purchases, yet represent a small slice of the overall loan market, which is correcting, while underwriting standards have tightened, abuses have been curbed, and the bad guys have gone out of business. There’s no reason to push the panic button there.

As the world becomes integrated, new fundamentals develop. Far East and the Middle East investments affect us greatly. Items: China makes 90% of all our Vitamin C. Mukesh Ambani, India's wealthiest resident is building a 60-story “house” in Mumbai, complete with helipad and parking for 170 cars. Cost: $1 billion, peanuts to him. The Fed’s comments aside, worldwide interest rate fluctuations had a large effect on our stock and bond markets last week. Global cash flow into the U.S. economy is vital to us.

The latest California home price appreciation report shows 1% year-over-year. The affordability factor becomes a major hurdle for the next generation of buyers. California homes were only 150% higher than in Texas in 2000. Now they’re 350% higher.

Minimum income needed to buy the California median priced $597,640 home is $100,250. Using a 6.5% interest rate with 10% down, the monthly payment including taxes and insurance impounds would be $4770. Less than 25% of all Californians can now qualify.

But Chico is not tanking. Deals are still going in the hopper every day. We’re too desirable, and a veritable bargain basement compared to the metros. A San Fernando Valley small condo goes for $494,000. You can still get a nice 3 BR 2 BA 1700 SF house here for $350,000. There were 594 active residential listings in Chico as of last Friday, median price $369,450.

It’s going to remain a buyer’s market here for the foreseeable future. Not that there’s a lack of transplants hovering out there waiting for good deals. Local REALTORS see it every day. The buyer is King for the moment. If you’ve got one, it might be prudent to bow a little in reverence. The worm has turned.

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 6-8-07

REAL ESTATE PATTERNS
By Ken DuVall

The Slump & The Spin

Finally even I admit we’ve hit a bump in the road. But there’s good news with the bad. April’s national numbers show new home sales up 16%, the biggest one-month gain in 14 years, yet 10% below a year ago. The median new home price is down 11.1% from March and down 10.9% from a year ago, the biggest year-over-year slide since 1970. Statewide there are now 5500 homes in foreclosure vs. 1100 in April 2006.

Sobering stats. However, the price decline partly results from buyers opting for lower cost homes. Builders are practically throwing in a free Lexus in every garage to sell new houses. They must keep cutting prices to reduce the inventory glut. The Nat’l Assn. of Home Builders expects new home sales to fall 18% this year, matching last year’s decline. Plus, interest rates are increasing, likely to peak at 6.6% by year end, adding to our woes. But wait…

You know I always put a positive spin on things. It’s comes from my venerable perspective. If you rely on media hype, you’re going to have a bad hair day every day. Let’s face it: Shocking stories sell newspapers. It’s a journalistic tradition. They embrace their role as public watchdogs and skeptics.

If you keep hearing “the sky is falling” long enough, you’ll finally come to believe it. Once a story develops, the media assaults us with it again and again. It beats you up. In various ways, the lunatics are running the asylum.

Ownership of chunks of Planet Earth is far more dear than gold. Diamonds were once coal that did well under pressure. If we didn’t need a roof over our heads, builders wouldn’t keep putting up houses. People are buying, but at a more reasonable, sustained pace. Deals are still going into escrow. If that stops, I’ll be the first one to throw in the towel.

So national prices are down 11%. That leaves a “mere” 30-40% profit of the 40-50% or more gain over the last few years. Real estate is not a get rich quick scheme. Example: Our “Avenues” houses between Mangrove and Esplanade, 2 BR, 1 BA 1000 SF “charmers” which I sold for $25,000-$30,000 in the 80’s, are now $250,000 to $300,000. Do the math.

Chico’s inventory was up to 563 active home listings last week for a 9.8 month (very high) unsold inventory index required to sell them all at today’s sales pace. But, our sales are UP 18%, 432 year-to-date sales vs. 366 a year ago, plus another 144 in escrow. Chico’s sold median price is only down 5.5% over a year ago, so don’t jump in front of a train just yet. Chico is the Chosen Place. Keep the Faith.

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.